With new car prices reaching all-time highs, the allure of a late-model used car can be rather tempting. But how do you know what you’re getting? Sure, you might save a few thousand dollars on the deal, but will you end up paying it all back in repairs? This scenario has long been the fly in the ointment for used car buyers, but there is a solution that can bring you peace of mind and still save you money in the long run. It’s called a certified car, and you can buy one from just about any dealer who also sells new cars. In this four-part series, we answer a few questions about CPO cars and whether one is right for you.
PART 1: WHAT IS A CERTIFIED CAR?
What does certified pre-owned (CPO) mean?
A CPO car is one that is previously owned, usually with no more than 60,000 to 80,000 miles and no older than five to seven years. (The time and mileage warranties vary by manufacturer.) CPO cars are backed by the original manufacturer, subjected to a rigorous, multi-point inspection and come with an extended warranty from the original date of service good at any dealer in the country.
What’s the difference between certified pre-owned and used cars?
A CPO car comes with a complete inspection that repairs any damaged or worn parts before being offered for sale. To get this same service when buying a used car, the buyer must pay for an inspection and usually any subsequent repairs. A CPO car includes an extended warranty, a limited bumper-to-bumper warranty and a number of services, such as 24-hour roadside assistance. A used car usually only offers the remainder of the factory warranty and only if it’s still in effect and fully transferable.
How does a car qualify for certification?
When the dealer acquires a used car, either through trade-in or lease return, they will put that car through a rigorous inspection program administered by a factory certified mechanic. If the car meets the manufacturer’s CPO qualifications, it is offered for sale as a CPO vehicle. The most important factors for a potential CPO car are that it must be in excellent condition, be mechanically and cosmetically sound and have low mileage. If a car doesn’t meet the CPO program requirements, it is either fixed or rejected from the program. Each automaker has a different set of criteria, but the bottom line is CPO vehicles are going to be the highest quality used cars to begin with.
Who certifies the cars?
A CPO car is certified by the dealer and in accordance with the manufacturer’s specifications and requirements. Although the dealer does the inspection and any repair work needed, the car is fully backed by the manufacturer just as if it were being sold new.
What’s the difference between certified and extended warranty?
An extended warranty is usually offered by the manufacturer when the car is purchased new. It extends the factory warranty for certain parts and may include a higher deductible as the vehicle ages. It may or may not be fully transferable. A CPO car also extends the factory warranty, but includes numerous perks, including loaner cars, roadside assistance and, in some cases, rental car reimbursement, oil changes and even free trial subscription to services such as smartphone apps, manufacturer connected services (think Hyundai Blue Link and GM OnStar) and satellite radio.
What’s the difference between certified and a service contract?
A service contract is coverage initiated by an independent underwriter, not a manufacturer. Some states require service contracts be underwritten by an insurance company, making it a bit easier to verify their validity. These contracts are often advertised as “Certified,” but the agreement is fundamentally different. There are numerous options with a service contract covering mileage and age, as well as where the repairs must be performed. In many instances, a service contract requires the buyer to foot the bill for repairs upfront and then be reimbursed.
Any dispute over reimbursement must be argued with the contract administrator, not the dealer that performs the work. You also run the risk of the contract underwriter going out of business. This may nullifying the pre-paid contract, although the dealer may still be required to honor the contract as laws covering these services vary by state. Remember, a service contract is essentially just break-down insurance, and these programs are not backed by the automaker that originally built that car so there’s often no pre-sale inspection process. Some of these contracts only cover moving parts or major mechanical components.
You are usually not required to get a service contract to obtain financing, so beware of any dealer that tells you otherwise. Some service contracts do not take effect until the manufacturer’s warranty has expired, while other come with very high deductibles, so be sure to read the fine print.
Editor’s Note: This article has been updated to reflect changes in Certified Pre-Owned programs